When buying a condominium, a mortgage is often not helpful

Should you buy a house or rent one? Neither option has been an option lately. Expensive mortgages, rising prices of building materials, and rising rents are putting a strain on another form of housing, cooperative housing. However, their financing has its specifics.

“Properties for own housing are the most difficult to find in the Czech Republic, practically in the whole of the European Union. Let us add the high prices of building materials and works. Apartment rents have also been rising rapidly recently. Unaffordable housing is a significant obstacle for many young generations to start a family. People are, therefore, logically looking for other forms of ownership. All this is reviving the demand for cooperative flats,” said Jiří Šedivý, Secretary of the Association of Czech Building Savings Banks (AČSS).

Support for cooperative housing is also an essential element of the state housing policy concept “Concept 2021+”, which was introduced by the Ministry of Regional Development. It aims, among other things, to introduce a new investment program for cooperative housing and is one of the recommendations of the OECD project on housing affordability in the Czech Republic. According to it, the state should support increasing the share of cooperative flats.

You do not own a house but rather a membership share in a cooperative

Cooperative housing is a variant between owning and renting. Some developers even include this type of housing in their offerings.

A person who buys a cooperative flat does not become the owner but a tenant. They own a membership share in the cooperative, which is the house owner and is thus also listed in the land register. The cooperative members then pay a monthly rent that includes the costs of maintenance and management of the house and possibly the repayments of a long-term investment loan granted for harmonious housing construction.

When buying a cooperative share, a sum of between one-fifth and one-third of the total price of the flat is required. At current apartment prices, this usually amounts to CZK 1.5–2.5 million. As experts point out, the advantage is that those interested in a cooperative apartment do not have to meet the strict conditions required for mortgages. When buying, they usually do not have to prove their income or guarantee anything. The cooperative buys the apartment building.

“The basic advantage of cooperative housing is that the housing cooperative handles all matters related to financing, i.e., obtaining a loan, and does not burden the member of the housing cooperative,” added Martin Kroh, chairman of the Czech Society for Housing Development.

For the membership share, a loan from a building society

For many people interested in buying a cooperative apartment, the initial deposit, roughly 20 to 30 percent of the total price, can be a problem. Not everyone has, for example, two million crowns in cash that they can deposit immediately. A loan may be the solution.

If you do not have another quality property in your inventory that you can guarantee or pledge to the bank, do not count on the bank granting you a mortgage loan. You cannot guarantee a membership share in a cooperative.

Building societies offer a loan product designcooperativeasing a co-operative flat and are an unsecured bridging loan. Representatives of savings banks confirmed that people are interested in financing cooperative housing.

“Continuously rising property prices, owning your own home is becoming unaffordable, which is why cooperative financing housing is increasingly popular and more easily accessible for many clients. There is no need to secure the loan with real estate, and the offer applies to both new-build and older co-operative flats. The cooperative housing fincooperativelso reflected in the figures. Compared to the previous year, we granted 20 percent more loans under this product,” said Martina Kotasová from Raiffeisen stavební spořitelna.